In a column written some weeks ago in the New York Times, David Brooks found it difficult to explain why “Biden does not get the credit he deserves” when the nation’s economic “misery index”—the sum of the unemployment and inflation rate—stood at an impressively low 7.7. Why, he asks, does Joe Biden receive a low approval rating that is stuck around 43 percent, when he should be soaring ahead to victory? Brooks attributes these welcome economic surges in new jobs to key Biden policy initiatives, which include the Inflation Reduction Act, the infrastructure bill, and the CHIPS and Science Act. But at the same time, he quotes an NBC poll that indicates that more than 70 percent of Americans think that this country is headed in the wrong direction. And he further refers to a Gallup poll from January 2023 that rates government as the top US problem, just ahead of inflation, which has eased somewhat in the months that followed. A similar New York Post poll has 74 percent of Americans bitter about their future.
In my view, Brooks has a tin ear in part because he does not address the everyday frustration voiced in, for example, Oliver Anthony’s “Rich Men North of Richmond,” a song that now tops the charts with its working-class anxieties about those northern Washington politicos who remain indifferent to the low wages and high taxes that plague Anthony’s unhappy band of outsiders. Nor is Anthony’s a lone voice. Jason Aldean’s controversial (and explicitly conservative) song “Try That in a Small Town,” still at number 4, stresses the moral divisions in the United States—cursing at cops and stomping on flags—more than its economic woes. And the anticipated Disney release of an updated version of the 1937 movie Snow White (without seven dwarfs), starring Rachel Zegler as a revamped Snow White and Gal Gadot as the Evil Queen, does not suggest happily ever after, much to the distress of David Dale Hand, whose father, David Dodd Hand, was the original supervising director. Hand said tartly that the film was plagued with “new woke things” and that both his father and Walt Disney “would be turning in their graves.”
These angry cries tell a very different story than does Brooks, who represents the elites who form the core of Biden’s support. But these dissenters give the key to the strong disjunction between Brooks’s apparently good news and the sense of isolation and resentment that drives a large portion of the population. It is the perceived loss of both economic and moral capital.
Start with the economics: Brooks starts with data that all relate to the current economic condition, not its future trajectory, which makes the overall economic picture far murkier. Begin with a common misconception that the public should support any program that creates “jobs.” That figure offers an incomplete economic measure of well-being. It is possible to drill for oil in two ways. The first creates massive employment by having the government use tax dollars to hire 10,000 people to use teaspoons to dig for oil. The second finds the most efficient drilling system for oil that does not pollute the neighbors. The first spends enormous resources but creates no capital asset. The second uses fewer resources but puts a social asset on the books.
Writ large, that concern applies to all the programs that Brooks lists as great achievements of the Biden administration. Yes, they necessarily create jobs in the short run, which helps keep that misery index low. But looking at the long-term effects tells a different story: wheel-spinning for little or no social gain. So what makes the 2022 Inflation Reduction Act desirable? According to the White House, it is that our most “pro-union president in history” works this progressive magic.
The Inflation Reduction Act lowers prescription drug costs, health care costs, and energy costs. It’s the most aggressive action on tackling the climate crisis in American history, which will lift up American workers and create good-paying, union jobs across the country. It’ll lower the deficit and ask the ultra-wealthy and corporations to pay their fair share.
It is a recipe for long-term disaster. The most obvious question: does this legislation have anything to do with inflation when the evidence a year later suggests that the obvious suspects—the Federal Reserve’s control over interest rates and the clearing up of supply chain difficulties—have played the dominant role? Nor is there any reason to suspect that matters will change in the long run, given that inflation depends on the ratio of the number of dollars chasing some given quantity of goods. If the amount of goods goes down, the inflation rate will increase even if no changes are made in the money supply. And here everything about that legislation demonstrates again the timeless proposition that the constant government effort to lower costs of any commodity by regulation or jawboning has at best uncertain effects. Meanwhile, it typically inhibits long-term investment in three vital areas of drugs, health care, and energy. Those long-term losses are not reflected in Brooks’s short-term misery index.
At the top of this misguided list is, of course, the huge investments designed to tackle the “climate crisis” in this country, without first asking how much this program will cost and what good it will do. The rough numbers show that it takes a hundred or more times the amount of acres to make the same amount of green energy that could be produced by using traditional fossil-fuel energy sources, even before one looks at the extensive costs for the fabrication, installation, transmission, and removal of clean energy facilities that belong on any social ledger. The gap between wind/solar energy and nuclear power generation is even greater.
Biden’s union allies are upset with the president for “doling out billions of dollars in subsidies for electric vehicles without demanding higher wages and other protections,” as reported in Politico. The first part of their critique is surely correct, insofar as subsidies always distort long-term resource allocation, in this case by taxing efficient energy sources to support inefficient ones. But the unions would be all too content with these subsidies as long as they were doled out only to union workers. Similar critiques apply to the infrastructure bill and the CHIPS Act, both of which receive White House blessings precisely because their massive internal subsidies and preferences interfere with long-term capital investment decisions. Under the current administration it is a self-evident truth worthy of the Declaration of Independence that that no matter what the current levels of taxation, it is always fair to increase taxation even more on the ultra-rich and corporations. And so, “Bidenomics” kills capital formation.
It is also important to look at the other source of the unease puzzling Brooks: the rise of woke culture, which is not without its negative economic effects as well. For a long time, the defenders of ESG—environmental, social, and governance reforms—were riding high. Their environmental program too often reflected the same misguided priorities that infected the Biden administration. The “S” and the “G” both have a strong component devoted to diversity programs in employment relationships and corporate giving—they ask boards of directors to look not just to the company’s financial welfare but to the interests of a wide variety of “stakeholders” including employees, customers, suppliers, and the communities in which they live. No one should think that any management of, for example, a financial firm, could survive by ignoring its relationships with these key groups. But the correct mode of doing business is to achieve good relationships through contract, not through a command-and-control regime that ignores fundamental principles of diversification by, for instance, refusing categorically to invest in fossil fuels. It is therefore a good sign that the demand for diversity, equity, and inclusion officers is on the decline. In all too many situations, their presence leads to conformity, inequity, and exclusion based on forms of identity politics that only divide individuals within firms.
What can be done to repair the economic damage in ways that address the national angst? On this issue, the great appeal of smaller government is that it follows the great Hayekian virtue of the decentralization of authority within a nation so that the dominant faction is no longer able to impose its will on others. That means the creeping expansion of the administrative state has to end. Its abuses are everyday occurrences illustrated, for example, by presidential executive orders on such matters as student loan forgiveness, or by the imperial behaviors of administrative agencies such as the SEC’s misguided directives on climate disclosures. Such abuses have to be curbed to create political breathing room for private initiatives.
How that happens in today’s political climate is anyone’s guess. We do have a clear warning that the long-term situation is out of whack from the decision of Fitch to downgrade US Treasuries because of a “steady deterioration of US governance,” punctuated by protracted struggles over raising the debt ceiling. That sentiment is reinforced by rising concerns that the aggressive implementation of Biden’s green agenda will “poke a big hole in America’s safety net,” as the Spectator put it, by making it impossible to fund these programs. Brooks’s sunny account of the low misery index rating does not begin to address these tough issues.
